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en-USThis Is How Student Loan Interest Workshttp://www.wisebread.com/this-is-how-student-loan-interest-works
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<p>Student loans are a heavy financial burden for most borrowers, but the loan balance isn't the only major financial blow; the interest that accumulates is also difficult to stay on top of.</p>
<p>Interest on a student loan is a major contributor to how big your monthly payment will be and how much your loan will <em>really </em>cost by the time you pay it off. Let's look at how student loan interest works and what you can do to get your loans paid off faster and for less money.</p>
<h2>Factors that determine interest on your student loan</h2>
<p>There are a few factors that determine how much you will pay in interest on your student loan: the interest rate, the amount you borrow, the loan term, and your payment plan.</p>
<h3>Interest rate</h3>
<p>When you take out a student loan, you'll need to pay back the amount you borrow, plus interest on the loan. Interest is charged as a percentage of the amount you owe. For example, a $10,000 loan at a 10 percent annual interest rate (compounded daily) will cost you $1,049 after a year. So after one year, you would need to pay back the $10,000 that you borrowed, plus $1,049 for interest.</p>
<h3>Amount borrowed</h3>
<p>We have seen that a $10,000 loan at a 10 percent annual interest rate costs $1,049 in interest after a year. Of course, most student loans are much bigger than $10,000 &mdash; what if you borrow more? If you borrow $20,000, the interest cost to carry this loan for a year would be $2,097. If you borrow $50,000, the interest after a year would be $5,243. The more you borrow, the more interest the loan carries.</p>
<h3>Loan term</h3>
<p>The loan term is how long it will take you to pay back the loan. For example, you could borrow $50,000 and pay it back over 10 years. In this case, the term of the loan is 10 years. You can reduce your monthly payments by choosing a longer loan term, but you will end up paying more in interest.</p>
<p>If you borrow $50,000 at a 10 percent annual interest rate, you would pay $660.75 per month and your total cost for interest over the life of the loan would be $29,290.44. Now, let's say you want lower monthly payments, so you go with a 20-year term instead of 10 years. Your monthly payment would be $482.51, but over the life of the loan you would pay a whopping $65,802.60 in interest &mdash; about $35,000 more!</p>
<h3>Payment plan</h3>
<p>Student loans have more flexibility in their payment schedules than other installment loans. The simplest plan is to make the same monthly payments over the entire term of the loan. However, since new college grads typically have a lower income just after graduation and earn a higher salary over time, you can select repayment plans that start off with smaller monthly payments that increase as your income increases.</p>
<p>Variable repayment plans do make it easier to make payments on student loans, but the price to be paid for this flexibility is interest. Any payment plan that has smaller payments in the early years will cost more in interest over all. (See also: <a href="http://www.wisebread.com/6-questions-to-ask-before-taking-out-student-loans?ref=seealso" target="_blank">6 Questions to Ask Before Taking Out Student Loans</a>)</p>
<h2>How much of your student loan payment goes to interest?</h2>
<p>When you make your monthly student loan payment, at first, most of your payment will go toward paying interest. Only a small amount will go toward paying down the principal. Over time, eventually more of your payment will chip away at the principal until your loan is paid off in full.</p>
<p>Here's an example of how a payment of $660.75 per month on a $50,000 student loan at 10 percent interest would be applied to interest and principal during a 10-year term.</p>
<p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5170/amortization.jpg" alt="" /></p>
<p>At first, you can see how the majority of the payment goes toward interest. But over time, as you continue to make payments, the balance of the loan decreases, thereby reducing the interest that accumulates and allowing more of your monthly payment to go to paying down the principal of the loan.</p>
<p>Most student loans give you the option to apply extra payments toward the principal. If you can pay a little extra each month, you'll bring your balance down faster and save money on interest payments over the life of your loan. For example, if you could pay $40 more per month, your loan would be paid off in nine years instead of 10, and your total interest cost would be about $3,000 less. (See also: <a href="http://www.wisebread.com/what-really-happens-when-you-dont-pay-your-student-loans?ref=seealso" target="_blank">What Really Happens When You Don't Pay Your Student Loans</a>)</p>
<h2>How to reduce your student loan interest</h2>
<p>Once you understand how student loan interest works, you can put that knowledge to work. There are a few ways you can reduce the overall cost of your student loans.</p>
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<p>Paying your loan off faster will reduce the cost of interest. Choose the shortest term you can afford, and make extra payments if possible.</p>
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<p>Borrowing more will increase your interest cost. Try to minimize living expenses while in school to keep your student loan balance as low as possible.</p>
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<p>Select the student loan option with the lowest interest rate available. If your rate is still higher than you'd like, consider refinancing your student loan later to a lower interest rate. (See also: <a href="http://www.wisebread.com/15-ways-to-pay-back-student-loans-faster?ref=seealso" target="_blank">15 Ways to Pay Back Student Loans Faster</a>)</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/this-is-how-student-loan-interest-works">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10">
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</div> </div><br/></br>BankingDebt ManagementEducation & Trainingamortizationcollegeextra paymentsinterest ratesloan termsprincipalrefinancingrepayment plansstudent loanstuitionWed, 09 May 2018 08:30:19 +0000Dr Penny Pincher2138310 at http://www.wisebread.comWhy You Should Call Your Mortgage Lender Every Yearhttp://www.wisebread.com/why-you-should-call-your-mortgage-lender-every-year
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<p>Most of us don't think too much about our mortgage lender once we've moved into our new home. We might complain about how much interest we're paying on our mortgage each month, but that's about as deep as it gets. This attitude, though, could be costing you money.</p>
<p>Your mortgage payment probably ranks as your biggest monthly expense. So why wouldn't you reach out to your lender, at least occasionally, to see if you can somehow reduce it?</p>
<p>It makes sense to contact your mortgage lender at least once a year to ask about lowering your interest rate, adjusting the term of your loan, or maybe even refinancing into a different loan type. Doing so could save you a significant amount of money each year.</p>
<p>Here are five questions you should call and ask your mortgage lender each year.</p>
<h2>1. Is there a way to lower your monthly payment?</h2>
<p>Mortgage interest rates have been rising since the middle of 2017. But this doesn't mean that the rate you have with your mortgage loan now is as low as it can ever be.</p>
<p>If you applied for your mortgage five or more years ago, was it at a time when you were saddled with thousands of dollars of credit card debt? Did you have late or missed payments on your credit reports? If your financial situation has improved since then, you might now qualify for a lower interest rate. And that lower rate will save you money on your monthly payment.</p>
<p>Consider this math: Say you are paying off a $200,000 30-year, fixed-rate mortgage with an interest rate of 5.25 percent. Your monthly payment, not including taxes and homeowners' insurance, will be about $1,104. If you now owe $180,000 on that same loan, moving to an interest rate of 4.25 percent would knock your monthly payment &mdash; again, not including taxes and insurance &mdash; down to about $885 a month. That's a savings of about $219 a month.</p>
<p>To get to that savings, you will have to refinance, replacing your existing loan with a new one with a lower interest rate. That will cost you some money upfront &mdash; often as much as $3,000 or more. But it's worth it to call your mortgage lender. First, ask if you might now qualify for a lower interest rate. Then ask yourself if the monthly savings from the new rate will be high enough to justify the cost of paying for a refinance. (See also: <a href="http://www.wisebread.com/how-long-does-it-take-break-even-with-a-home-refi?ref=seealso" target="_blank">How Long Does it Take Break Even With a Home ReFi?</a>)</p>
<h2>2. Can you refinance to a shorter loan?</h2>
<p>Refinancing isn't just a way to lower your monthly mortgage payment. You can also reduce the amount of interest you will pay over the life of your loan.</p>
<p>It's no secret that a good chunk of your monthly mortgage payment goes toward interest. If you are paying off a $200,000 30-year, fixed-rate mortgage with an interest rate of 4.25 percent, you'll pay more than $154,000 in interest if you take the full three decades to pay off that loan.</p>
<p>But if you refinance to a shorter-term loan, you can dramatically reduce the interest you pay over the life of your loan. Say you owe $185,000 on that same loan. If you refinance to a 15-year, fixed-rate loan with an interest rate of 3.8 percent, you'll now pay just more than $57,000 if you take the full 15 years to pay off the loan. Just be aware that because your loan term is shorter, your monthly payment will be higher.</p>
<p>Again, it's worth a call to your lender to determine how much you could save in interest by refinancing to a shorter-term loan. If your budget can handle the higher monthly payment, this move can save you plenty of money in the long run. (See also: <a href="http://www.wisebread.com/is-a-15-year-mortgage-a-good-idea?ref=seealso" target="_blank">Is a 15-Year Mortgage a Good Idea?</a>)</p>
<h2>3. Can you pay more toward the principal?</h2>
<p>Refinancing does come with financial rewards. But it's also costly and time-consuming. If you can't drop your interest rate by enough, you won't reap enough monthly savings anyway.</p>
<p>But there is a way to reduce the amount of interest you'll pay over the life of your loan and shorten the number of years it will take you to pay it off: You can pay a bit extra with each mortgage payment.</p>
<p>Say you have 25 years remaining on a 30-year, fixed-rate mortgage loan of $200,000 with an interest rate of 4.5 percent. If you pay an extra $100 toward your loan's principal balance each month, you can reduce the time it takes you to pay off that loan by three years and nine months. You can also save nearly $21,000 in interest payments over the life of the mortgage.</p>
<p>If your budget can handle the extra $100 a month, this could be a smart financial move. Ask your lender how paying a bit extra each month can shorten the term of your loan and lower the amount of interest you pay. You might be surprised at the difference these small payments can make. (See also: <a href="http://www.wisebread.com/should-you-pay-your-mortgage-off-early?ref=seealso" target="_blank">Should You Pay Your Mortgage Off Early?</a>)</p>
<h2>4. Is it time to move to a steadier mortgage type?</h2>
<p>You might be paying off an adjustable-rate mortgage. As the name suggests, the interest rate with such mortgages doesn't remain fixed, but instead adjusts according to whatever economic index your loan is tied to on a regular schedule.</p>
<p>Most adjustable-rate mortgages, better known as ARMs, start with a fixed period of five to seven years during which your rate won't change. After that fixed period ends, your rate will adjust on a regular schedule, usually once every year or once every two or five years, depending on the type of ARM you are paying off.</p>
<p>The attraction of ARMs is that you often start with an interest rate that is lower than what you'd get with a more traditional fixed-rate mortgage. The risk is that when that rate adjusts, it could rise far higher, bumping your monthly mortgage payments up with it.</p>
<p>A way to avoid the adjustment is to refinance to a fixed-rate mortgage with a rate that stays in place throughout the life of your new loan. If you are nearing the end of your ARM's fixed period, give your lender a call. You might qualify for a refinance to a fixed-rate loan that comes with an interest rate that while higher than your current rate, will be lower than the new rate you'd soon face with your current ARM. (See also: <a href="http://www.wisebread.com/fixed-or-adjustable-choosing-the-right-mortgage-loan?ref=seealso" target="_blank">Fixed or Adjustable? Choosing the Right Mortgage Loan</a>)</p>
<h2>5. Can you make your monthly loan payments less of a burden?</h2>
<p>Are you struggling to make your monthly mortgage payments on time? Are you worried that you won't be able to make your payment next month? Then it's definitely time to call your lender.</p>
<p>Your lender, for instance, might be willing to reduce your interest rate temporarily or lengthen the term of your loan so that your monthly payment is lower. Be prepared to prove to your lender that you can no longer afford your monthly mortgage payments. If you've lost your job, show the paperwork proving it. If you've taken a pay cut, send your new paystubs.</p>
<p>There's no guarantee that your lender will help you. But you'll never know if you don't call. And ignoring the problem won't help. (See also: <a href="http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage?ref=seealso" target="_blank">8 Signs You're Paying Too Much for Your Mortgage</a>)</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/why-you-should-call-your-mortgage-lender-every-year">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1">
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</div> </div><br/></br>Real Estate and Housingadjustable rate mortgageinterest rateslower monthly paymentsmortgage lendersmortgagesrefinancingMon, 30 Apr 2018 08:30:17 +0000Dan Rafter2131786 at http://www.wisebread.comHow to Benefit From Rising Interest Rateshttp://www.wisebread.com/how-to-benefit-from-rising-interest-rates
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<p>Interest rates went up three times in 2017, and they are under consideration to be increased yet again within the next couple of months. As interest rates continue to rise, what does that mean for you as a borrower?</p>
<p>While rising interest rates means it costs more for you to borrow, it also can work in your favor. Here are a few examples of how The Federal Reserve hikes can benefit you financially.</p>
<h2>1. Throw more into savings</h2>
<p>Savings accounts and certificates of deposit have been at historically low interest rates in the past few years. While a hike in federal interest rates won't make you rich, it can give you a slight boost in your savings power, for no extra work. (See also: <a href="http://www.wisebread.com/5-best-online-savings-accounts?ref=seealso" target="_blank">Best Online Savings Accounts</a>)</p>
<p>As interest rates increase, now is a great time to start socking extra money away into savings accounts and CDs. While putting extra money into savings might not result in as much interest earned from other saving avenues, such as retirement accounts or other investments, you can use the higher interest rates as an incentive to boost your savings or emergency fund contributions.</p>
<h2>2. Take advantage of still low interest rates</h2>
<p>During the financial crisis of 2007, the credit bubble burst, causing lending to come to a near halt. The Federal Reserve drove interest rates to the floor, and eventually pulled lenders back from the brink.</p>
<p>Higher interest rates today may make it more expensive for borrowers than over the past several years, but rates are still near historic lows. While it's important to use caution when borrowing money, now might be the time to strike if you've been on the fence about making a big purchase, such as buying a home.</p>
<h2>3. Get more bang for your buck abroad</h2>
<p>Traveling abroad can be expensive enough in its own right. But as federal interest rates rise, it could very likely strengthen the U.S. dollar.</p>
<p>A stronger dollar means Americans can travel abroad and get a better exchange rate than usual. Thanks to exchange rates working in your favor, you can splurge a little bit more (or save more) than you had maybe originally budgeted for.</p>
<h2>4. Pay off consumer debt</h2>
<p>The interest rates on your debt will rise if the Fed continues to increase rates. This means you will be required to pay even more interest on your debt, owing more money overall.</p>
<p>You can lessen the blow by prioritizing your debt repayment now. The sooner you pay off debt at a lower interest rate, the more money you will save. Use the threat of increasing rates to get your debt paid off as soon as possible.</p>
<p>Credit card debt is especially susceptible to climbing interest rates. Credit card debt has its own high interest rate, so any additional increase from the Federal Reserve will only cost you more. Avoid paying extra interest by prioritizing debt repayment today. (See also: <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=seealso" target="_blank">The Fastest Method to Eliminate Credit Card Debt</a>)</p>
<h2>5. Consider refinancing</h2>
<p>If you've been considering refinancing your home or auto loan, you may want to do it before the Fed considers another increase. In addition, if you bought your home at a higher interest rate and have not yet considered refinancing, you may not be getting the best deal available.</p>
<p>Even if federal interest rates don't change again, you may still find it advantageous to refinance your mortgage or auto loan to a better rate. (See also: <a href="http://www.wisebread.com/4-smart-ways-to-lower-your-monthly-mortgage-payment?ref=seealso" target="_blank">4 Smart Ways to Lower Your Monthly Mortgage Payment</a>)</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/rachel-slifka">Rachel Slifka</a> of <a href="http://www.wisebread.com/how-to-benefit-from-rising-interest-rates">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4">
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</div> </div><br/></br>Personal FinanceBankingborrowingcertificates of depositdebt repaymentfederal reserveinterest rateslendingrefinancingsavings accountsWed, 21 Mar 2018 09:30:19 +0000Rachel Slifka2115362 at http://www.wisebread.comWhat to Do If You Can't Pay Your Private Student Loanhttp://www.wisebread.com/what-to-do-if-you-cant-pay-your-private-student-loan
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<p>While your private student loan seemed like a good idea when you were pursuing a degree, now it might feel like an unbearable weight &mdash; especially if you didn't get the job or paycheck you were hoping for after graduation. If you are struggling to pay your student loans, know that you are not alone: American grads share over $1.48 trillion in student loan debt, with a delinquency rate of 11.2 percent.</p>
<p>Private student loans add an extra layer of difficulty for borrowers. While federal student loans offer <a href="http://www.wisebread.com/which-student-loan-repayment-plan-saves-you-the-most?ref=internal" target="_blank">various repayment programs</a> to those struggling to make payments, private loans notoriously have less leeway.</p>
<p>Not paying back your student loans is not an option. Not only can defaulting on your student loans hurt your credit score, but it can eventually lead to calls from collection agencies and having your wages garnished. Here are several options to consider instead when you are struggling with your private student loans. (See also: <a href="http://www.wisebread.com/what-really-happens-when-you-dont-pay-your-student-loans?ref=seealso" target="_blank">What Really Happens When You Don't Pay Your Student Loans</a>)</p>
<h2>1. Refinance your loans</h2>
<p>Are you paying a lot of interest for your student loan? Get quotes from <a href="http://www.wisebread.com/3-private-lenders-that-can-really-save-you-money-on-your-student-loans?ref=internal" target="_blank">private student loan lenders</a> to see if you can land a lower interest rate. Decreasing your interest rate by 1 percent might not save you a lot each month, but it can save you thousands over the life of your loan.</p>
<p>If you are really in a pinch financially, and you have exhausted your options, you can refinance your student loans to a longer term. This can dramatically decrease your monthly payment, but it will mean that you are paying more overall over the life of the loan. Consider the long-term effects of refinancing your loan from a 10-year term to a 20-year term before finalizing that decision. (See also: <a href="http://www.wisebread.com/should-you-refinance-your-student-loan?ref=seealso" target="_blank">Should You Refinance Your Student Loan?</a>)</p>
<h2>2. Increase your income</h2>
<p>Earning more at work can help ease your budget woes. However, getting a bigger paycheck is easier said than done. For employees that have been on the job for a while, ask for a raise or look for opportunities for in-house promotions. Many companies like to hire current employees for higher positions because in the long run, it is more cost effective and timesaving for the company. Don't see a new job listing? Don't let that stop you from asking your employer. They might be too busy to post a new job listing. (See also: <a href="http://www.wisebread.com/how-to-negotiate-a-raise-out-of-the-blue?ref=seealso" target="_blank">How to Negotiate a Raise Out of the Blue</a>)</p>
<h2>3. Look for jobs with student loan repayment perks</h2>
<p>Many companies are starting to offer student loan repayment options as an employee benefit. Companies like Staples, Fidelity, and Aetna offer this perk, so it might be worth looking at job listings with these companies. (See also: <a href="http://www.wisebread.com/these-17-companies-will-help-you-repay-your-student-loan?ref=seealso" target="_blank">These 17 Companies Will Help You Repay Your Student Loan</a>)</p>
<h2>4. Find a side gig</h2>
<p>If you can't increase your income through your regular paycheck, try earning money on the side. There are many avenues for earning extra cash through a freelance or side gig; you just have to find the right fit for you and your schedule. Driving for Uber or Lyft, housesitting, or dog walking are all easy ways to earn extra income each month. For those with more specific experience, try freelance writing, social media managing, or virtual assisting. (See also: <a href="http://www.wisebread.com/14-best-side-jobs-for-fast-cash?ref=seealso" target="_blank">14 Best Side Jobs For Fast Cash</a>)</p>
<h2>5. Sell unused items</h2>
<p>You might have extra money taking up space in your closet or garage. Go on a decluttering mission this weekend and find everything you don't need or want anymore. Sell smaller, valuable items, like a name brand sweater, on eBay. Sell larger items on Craigslist or Offerup. For everything else, sell in a yard sale. People buy junk at yard sales, so don't be surprised if your old towels or comforter set fetch you a few bucks. (See also: <a href="http://www.wisebread.com/12-garage-sale-items-that-sell-like-hotcakes?ref=seealso" target="_blank">12 Garage Sale Items That Sell Like Hotcakes</a>)</p>
<h2>6. Get real about your budget</h2>
<p>If you can't find room in your budget for your student loan payments, it might be time to get a new budget. Take a hard look at what expenses can be cut. This can be a painful exercise, but if it means being able to stay current with your student loan bills, it is worth it.</p>
<p>Cut the fun stuff from your budget first, like coffee runs and shopping trips. Downsize your cellphone and cellphone plan and cancel any monthly subscriptions. This includes magazines, Netflix, gym memberships, and anything else you can live without.</p>
<p>If you still cannot afford your student loan payments after cutting out the fun stuff, it may be time to adjust your way of living altogether. As hard as it may be, consider ditching your car with a car payment for an older vehicle that can be bought with cash. Live with a roommate or move back home temporarily while you get ahead on your debt.</p>
<p>Paying off private student loan debt is a huge chore and making the sacrifices to do it can seem impossible. However, it is better to live with your parents or a drive around town in a clunker than to be delinquent on your student loans. (See also: <a href="http://www.wisebread.com/5-ways-to-pay-off-your-student-debt-faster?ref=seealso" target="_blank">5 Ways to Pay Off Your Student Debt Faster</a>)</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/what-to-do-if-you-cant-pay-your-private-student-loan">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10">
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</div> </div><br/></br>Debt ManagementEducation & Trainingbudgetingextra incomeprivate student loansrefinancingside gigsstudent loan repaymentMon, 19 Mar 2018 09:30:24 +0000Ashley Eneriz2114761 at http://www.wisebread.com5 Ways New Parents Can Manage Debthttp://www.wisebread.com/5-ways-new-parents-can-manage-debt
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<p>Bringing a new little one into your family is an exciting time, but it can also be stressful if you have to juggle new baby expenses on top of debt repayment. Don't get overwhelmed. These tips will help you to pay off debt faster so you can enjoy your baby's first moments without so much stress. (See also: <a href="http://www.wisebread.com/7-signs-youre-financially-ready-to-start-a-family?ref=seealso" target="_blank">7 Signs You're Financially Ready to Start a Family</a>)</p>
<h2>1. Don't add to your debt burden</h2>
<p>Babies can be costly, especially when you're buying diapers and formula weekly. Be as cost-effective as possible when shopping for your new bundle of joy. Do your best to pay for diapers, baby food, and formula out of your normal grocery budget. This may mean juggling some of the normal things you buy to fit in an extra $25 to $50 each week.</p>
<p>That can feel like a stretch, but it doesn't have to be a drastic one. It might just mean you eat a rice and bean meal once per week, or eat only chicken instead of steak and fish. You won't have to make this grocery trade forever, it's just a means to an end.</p>
<p>As far as baby gear and clothes go, buy used or use hand-me-downs when possible. The first six months of your baby's life go fast, and items like swings, baby wraps, bath tubs, and rockers are not needed after that time frame, so don't waste your money. Any baby items that require strict safety regulations &mdash; like car seats &mdash; should be bought new. (See also: <a href="http://www.wisebread.com/dont-waste-money-on-this-pricey-baby-gear?ref=seealso" target="_blank">8 Things You Definitely Don't Need for a Baby</a>)</p>
<h2>2. Don't be afraid to ask for help</h2>
<p>There is no shame in admitting to family members and close friends that you are working hard to pay off debt and raise a baby. They might be able to take care of the baby one or two days a week so you can go to work, or they might have a lead for someone who is looking to hire out a side job. Many times, parents or grandparents are happy to have you over once a week for dinner, which can save you a small amount on your grocery bill.</p>
<p>Outside of your family and friends, check to see if you are qualified for <a href="https://www.fns.usda.gov/wic/wic-eligibility-requirements" target="_blank">WIC benefits</a> or <a href="https://www.fns.usda.gov/snap/eligibility" target="_blank">food stamps</a>. Furthermore, if your debt is a federal student loan, you might be able to lower your payments <a href="https://studentloans.gov/myDirectLoan/ibrInstructions.action" target="_blank">based on your income</a>.</p>
<h2>3. Refinance and rebalance your debts</h2>
<p>Write down all of your debts and their APRs. Are you getting the best deal for them, or are you throwing your money away on high interest rates?</p>
<p>If your credit score is healthy, try refinancing your auto loan, student loan, or mortgage to an arrangement with more favorable terms. The difference from a lower monthly payment can go toward expenses you need for your new baby.</p>
<p>If you're struggling with credit card debt, consider moving that balance to a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=internal" target="_blank">balance transfer credit card</a> with a promotional 0 percent APR. During that promotional window &mdash; typically between six and 21 months &mdash; interest does not accrue. This can be a tremendously effective way to pay down debt while saving on interest, especially considering that typical credit card rates can exceed 16 percent. Just be sure to pay the balance off in full before the promotional APR ends and the normal rate kicks in.</p>
<h2>4. Try to survive on one income</h2>
<p>Another strategy to tackle debt before and after the baby comes is to try to live on one income. Devoting one income to living expenses and the other income to debt repayment can quickly reduce the debt you owe. It takes a lot of sacrifice and budget cuts, but you will get out of your debt situation faster.</p>
<p>After debt is repaid, one parent can choose to stay home with the baby, which might be a better option financially than paying for child care. Or, both parents can keep working and continue to practice living on one income to supercharge their emergency fund and retirement savings. (See also: <a href="http://www.wisebread.com/how-to-go-from-two-incomes-to-one?ref=seealso" target="_blank">How to Go From Two Incomes to One</a>)</p>
<h2>5. Make drastic cuts</h2>
<p>What drastic cuts can you make during this period of your life? Huge budget cuts are not fun, but they don't have to be permanent changes. Can you sell an extra household vehicle and get by with one? Could you sell some of your clothes, gadgets, or furniture? Can you cut your cable subscription for a while? Could you do a spending ban on anything that isn't an absolute necessity? (See also: <a href="http://www.wisebread.com/becoming-a-one-car-family-5-points-to-consider?ref=seealso" target="_blank">Becoming a One-Car Family: 5 Points to Consider</a>)</p>
<p>These options aren't for everyone, but talk them over with your partner to figure out how you can get serious about your debt repayment. Remember that it is better to go extremes now and pay off your debt so you can enjoy growing your family with the comfort of being debt-free.</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/5-ways-new-parents-can-manage-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1">
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</div> </div><br/></br>Debt ManagementFamilybalance transferbudget cutscutting expenseskidsnew babyone incomerefinancingsaving moneyThu, 15 Mar 2018 09:00:07 +0000Ashley Eneriz2114572 at http://www.wisebread.comWhat You Need to Know About Divorce and Credithttp://www.wisebread.com/what-you-need-to-know-about-divorce-and-credit
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<p>Breaking up a marriage isn't cheap. According to Bankrate, the average divorce costs $15,000, but a contentious divorce can run up to $100,000. Beyond the legal fees, former spouses also frequently must face new financial strains after ending a relationship. One spouse, for instance, might now have to rent an apartment or pay a new mortgage while also paying big dollars in child support or alimony.</p>
<p>Divorce can be tough on your credit score, too. Just because you're divorcing doesn't mean that your former spouse can't still hurt your credit. If your ex doesn't pay a credit card bill on time, your credit score could tumble &mdash; by as much as 100 points &mdash; if that particular card is still in both of your names.</p>
<p>Fortunately, it is possible to rebuild your credit score after a divorce causes a blow. Doing so requires the same basic financial habits that helped you build a solid score in the first place.</p>
<h2>Divorce and your credit</h2>
<p>When you divorce, you'll likely work with an attorney to divide the assets and debts that you and your spouse shared. This can be a complicated process, even for a professional. In the best case scenario, you and your ex will reach an agreement about who will pay which debts. If that doesn't work, the court may decide this for you.</p>
<p>Once your divorce is finalized, the court will provide you with a divorce decree. This document is filled with information, including a list of who will pay what debts now that your marriage is over. Here's the problem, though: A divorce decree won't protect you should your ex not make payments on accounts that you and your former spouse jointly owned.</p>
<p>Say you and your ex took out a credit card account together. Your divorce decree might state that your ex is responsible for paying down this debt. But if your ex stops paying on the card, and the card remains in your name, too, your credit score will take a hit. That's because your creditors still view the debt on this account as the responsibility of both your former spouse and you, no matter what your divorce decree says. Creditors don't &quot;care&quot; what your divorce decree says. They will only look at what's in your credit agreement.</p>
<p>Missed payments on mortgage loans, auto loans, and other joint accounts can also wreck your credit score. (See also: <a href="http://www.wisebread.com/spouses-and-debt-whos-really-on-the-hook-for-those-bills?ref=seealso" target="_blank">Spouses and Debt: Who's Really on the Hook for Those Bills?</a>)</p>
<h2>Get rid of joint accounts</h2>
<p>One of the best ways to repair any damage to your credit score following a divorce is to eliminate any joint accounts you shared with your spouse. They should now be in your name, or your spouse's name, only. That way, if your former spouse misses a payment, it won't hurt your credit score.</p>
<p>Doing this can be tricky. If you and your ex have a joint credit card account, your best bet is to pay down that account off as quickly as possible and close it. Closing a credit card account can inflict a minor blow to your credit score, but in the case of a divorce, closing a joint account is usually worth the hit.</p>
<p>If you and your former spouse share an auto loan, you might be able to refinance into a new loan that is solely under the name of you or your spouse. The same holds true for a mortgage.</p>
<p>Refinancing, though, isn't always possible. If the new loan is to be under your former spouse's name only, your lender can only count that person's income when refinancing. If your ex's income isn't high enough to qualify for a new loan, a refinance might be rejected.</p>
<p>In this case, you might have to sell the car or home in both your names. You can use the funds from these sales to pay off any other joint loans, and eliminate the possibility that a missed payment by your ex will slow your efforts to rebuild your credit score. (See also: <a href="http://www.wisebread.com/how-to-protect-yourself-financially-during-a-divorce-or-separation?ref=seealso" target="_blank">How to Protect Yourself Financially During a Divorce or Separation</a>)</p>
<h2>Rebuilding after the damage</h2>
<p>There are no quick fixes for a credit score that has taken a dive. The fixes that <em>are</em> available take time and discipline.</p>
<p>First, once your divorce is final, make sure to pay all your monthly bills on time. If you're a few days late on a credit card payment, don't panic. Payments aren't counted as officially late and reported to the national credit bureaus until they are 30 days past due. If you've missed your payment by a week, send it in before you hit that 30-day mark.</p>
<p>Secondly, immediately start paying down as much of your credit card debt as you can. The lower the debt on your credit cards, the more your credit score will rise.</p>
<p>Be careful, too, how you manage your credit cards moving forward. Never charge more than you can afford to pay off in full every month. And once cards are paid off, keep the accounts open, even if you don't plan on using the card. Keeping your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">credit utilization ratio</a> low (the amount of credit you are using out of your total available balance) will also be a huge help to you. Your credit score will be higher if you are using less of your available credit &mdash; say, under 30 percent &mdash; and you can achieve this sooner by leaving your paid-off credit accounts open.</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/what-you-need-to-know-about-divorce-and-credit">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5">
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</div> </div><br/></br>Personal Financecredit scoredebtdivorceex spousejoint accountsmarriagerebuilding creditrefinancingWed, 07 Mar 2018 09:00:09 +0000Dan Rafter2111738 at http://www.wisebread.comCutting Your Car Payment Is Easier Than You Thinkhttp://www.wisebread.com/cutting-your-car-payment-is-easier-than-you-think
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<p>Buying a car can be one of the most expensive purchases you'll ever make. Because most people don't have enough cash saved to buy a new vehicle, they often turn to auto loans to finance the purchase. But, the interest rates and monthly payments on a car loan can eat up a lot of your budget. In fact, Experian reported the national average payment for a new-car loan is $509.</p>
<p>If you have not-so-great credit, that payment can be even higher. And, you'll pay hundreds or even thousands more in interest.</p>
<p>However, you don't have to remain stuck with a bad loan. There's a way to reduce payments and save money on a car loan: refinancing. Best of all, it only takes about 10 minutes. (See also: <a href="http://www.wisebread.com/6-smart-auto-finance-options?ref=seealso" target="_blank">6 Smart Auto Finance Options</a>)</p>
<h2>What is car loan refinancing?</h2>
<p>When you purchased your car, you took out a loan through the dealership or bank for the amount you paid. At that time, you agreed on the loan amount, interest rate, repayment term, and monthly payment.</p>
<p>By refinancing, you change all of those terms. When you refinance a car loan, you apply for a new loan with a bank or credit union. Depending on your credit, you could get a new loan with a lower interest rate or smaller monthly payments.</p>
<p>Refinancing makes sense when you are struggling to keep up with your payments. By taking out a new loan with a longer repayment term, you can dramatically reduce your monthly bill. You'll pay more in interest over time, but extending the loan's payment period can give you necessary breathing room in your budget.</p>
<p>Or, if your goal is to become as debt-free as possible, refinancing can also help you save money and pay off debt sooner. With a lower rate, more of your payments go toward the principal rather than interest.</p>
<h2>How much you can save</h2>
<p>The average interest rate for a used car loan is 8.88 percent, according to Experian. However, if you have bad credit, rates have been reported as high as 29.99 percent.</p>
<p>When you need a car <em>right now</em>, such as when you need transportation for a new job, you might not give much thought to the interest rate. But that high rate can cost you.</p>
<p>Let's say you have poor credit and you buy a used car with a $10,000, 72-month loan at 15 percent interest. Your monthly payment would be $211. However, that high interest rate would cause you to pay back $15,224 in total &mdash; more than $5,000 over what you originally borrowed.</p>
<p>If you improved your credit and were approved for a refinance at just 8 percent interest, the savings would be significant. If you kept a 72-month term, your monthly payments would be reduced to $175 a month. But, even better, you'd pay back just $12,624 over the length of your repayment. Refinancing your loan would save you $2,600.</p>
<h2>How to refinance your auto loan</h2>
<p>If you're interested in refinancing, it's a simple process. Many banks and credit unions offer refinancing options for car loans. And, many allow you to get an estimate and apply for a loan online in just a few minutes. Some banks also allow you to get a rate quote with just a soft credit pull, so your credit score is not affected. (See also: <a href="http://www.wisebread.com/how-credit-inquiries-affect-your-credit-score?ref=seealso" target="_blank">How Credit Inquiries Affect Your Credit Score</a>)</p>
<p>Each bank has its own eligibility requirements, but in general, lenders require your car to be relatively new. Many will only work with you if your car is less than 10 years old. There's usually a minimum amount you can refinance, so if you only owe a few thousand dollars on your car loan, it might not be the right option for you.</p>
<p>Most lenders also require you to be current on your payments. If you're behind, you'll have to get back on track before you are able to refinance.</p>
<h2>Compare offers, too</h2>
<p>If you got stuck with a high-interest loan due to poor credit earlier on, refinancing your car loan can be a smart way to save money, cut your payments, or pay off your debt faster. Make sure to compare offers from multiple banks or credit unions to get the best possible loan terms.</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/kat-tretina">Kat Tretina</a> of <a href="http://www.wisebread.com/cutting-your-car-payment-is-easier-than-you-think">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1">
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</div> </div><br/></br>Cars and Transportationauto loansbuying a carcar loanscar paymentsinterest ratesrefinancingsaving moneyvehiclesFri, 03 Nov 2017 08:30:10 +0000Kat Tretina2045996 at http://www.wisebread.comWhat to Do if You've Signed Up for a Terrible Loan or Credit Cardhttp://www.wisebread.com/what-to-do-if-youve-signed-up-for-a-terrible-loan-or-credit-card
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<p>You thought you were buying your dream home, but now you realize that you'll struggle to afford the monthly mortgage payments. Or maybe you thought that new car would look great in your driveway, only to realize after you signed the sales contract that it barely gets 15 miles to the gallon.</p>
<p>We all make bad decisions. But when you sign up for a bad loan or credit card, those bad decisions can come with serious financial repercussions.</p>
<p>Fortunately, a bad loan or credit decision doesn't have to be permanent. Here are some financial contracts you might regret signing, and the steps you can take to get out of them.</p>
<h2>Refinancing your mortgage</h2>
<p>Maybe you thought refinancing your 30-year, fixed-rate mortgage loan to a 15-year version was a smart financial move. A 15-year loan, after all, would give you a lower interest rate and save you thousands on interest payments. Unfortunately, you overestimated your ability to make the higher monthly payments that come with a shorter-term mortgage.</p>
<p>You can get out of a refinance agreement easily if you act quickly. The &quot;right of rescission&quot; gives borrowers the right to cancel their refinance agreement if they do it within three days of either closing on their loan, or receiving their loan disclosure documents, whichever comes first. You don't have to provide a reason for backing out of your refinance agreement.</p>
<p>These three days are business days, but they do include Saturday. If you want to cancel that refinance, act quickly.</p>
<h2>Home equity loans</h2>
<p>The three-day right of rescission applies to home equity loans, too. The rules are the same for refinancing: If you want to back out of your new home equity loan, you have to do so within three business days.</p>
<p>There is a reason for the right of rescission: The government wants to offer consumers a final way to protect their homes before they take on new loans. Homes are used as collateral in refinances and home equity loans, meaning that lenders can take these assets if their owners stop making payments. The right of rescission gives consumers one last chance to avoid signing up for a new loan that they might not be able to afford.</p>
<h2>A single-family mortgage</h2>
<p>Consumers often mistakenly believe that the right of rescission applies to buying a single-family home, as well. Unfortunately, it doesn't.</p>
<p>Unless buyers include a set cooling-off period in their sales contracts &mdash; specifying a certain number of days in which they can change their mind about buying the home &mdash; walking away from an agreement to buy a single-family home can cause them plenty of financial pain.</p>
<p>After buyers sign a contract to buy a home, they write out an earnest money check. This check, which is supposed to show sellers that the buyers are serious about purchasing their home, is deposited into an escrow fund until the home sale actually closes. The amount of earnest money buyers deposit varies, but it is usually 1 percent to 2 percent of a home's sale price. For a $200,000 home, buyers can provide $2,000 to $4,000.</p>
<p>If buyers change their mind and walk away from a home purchase, they will usually lose that earnest money, breaking a sales contract could cost them thousands of dollars. But there are exceptions, known in the real estate business as contingencies. If the home inspection turns up serious problems, buyers can usually break the contract and keep their earnest money. If buyers can't qualify for a mortgage loan to finance the purchase of the home, they can again usually break the contract and keep that earnest money.</p>
<h2>Buying a condo</h2>
<p>Things are different when you sign a contract to purchase a condominium or co-op. You'll still have to provide earnest money. But you also have a window of time &mdash; which varies according to the state in which you are buying &mdash; to break your contract without losing that money.</p>
<p>Condo and co-op purchase agreements come with a review period. During this period, you can opt out of the purchase agreement you signed and receive your earnest money back, no questions asked. Just make sure you act within the review period.</p>
<p>This review period can vary significantly. In North Carolina, buyers have seven days to back out of a purchase agreement without suffering a financial hit. In Florida, the review period lasts 15 days. Make sure to check what the review period is in your particular state.</p>
<h2>Leasing a car</h2>
<p>If you buy a car and finance it through a traditional auto loan, you're pretty much stuck, even if you don't like the car. If your car has continual mechanical problems, and is always in the shop, you might be able to turn to your state's lemon law to cancel your purchase contract. But that is a long shot.</p>
<p>If you are leasing a car, you have more options. You can transfer your auto lease &mdash; and get rid of that car you don't like &mdash; by using a third-party service such as Lease Trader or Swapalease.com to pass your lease onto another consumer seeking to lease a vehicle.</p>
<p>Before you do this, make sure that your leasing company allows such transfers. And be sure to read the fine print in your lease. Some leasing companies will list you as guarantor on your lease even after you transfer it. If the person who takes over your lease stops making payments, your leasing company will seek to collect those payments from you.</p>
<h2>A credit card</h2>
<p>Is there a credit card in your wallet that comes with sky-high interest rates? Or maybe it's just a basic card that doesn't offer any rewards. You might decide to cancel that card. But you should think twice.</p>
<p>Canceling a credit card can hurt your credit score, even if you never plan to use that card again. The amount of available credit you have is a determining factor in calculating your credit score. Canceling a card will remove some of your unused, available credit &mdash; and, if you carry a balance on your other cards, automatically increase the amount of available credit that you are using. As a result, your credit score will take a hit. It's often smarter to simply not use that card than to cancel it.</p>
<p>If you really do want to cancel the card &mdash; maybe you're worried that having it in your wallet will tempt you to use it &mdash; simply call the customer service number on the back. You will have to pay off your existing balance (or have previously transferred it to a different card) before you can close your account. (See also: <a href="http://www.wisebread.com/how-to-ditch-a-credit-card-without-dinging-your-credit-score?ref=seealso" target="_blank">How to Close a Credit Card Without Dinging Your Credit Score</a>)</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/what-to-do-if-youve-signed-up-for-a-terrible-loan-or-credit-card">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2">
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</div> </div><br/></br>Personal Financeauto loansbad loanscondoscredit scorehome equity loaninterest ratesmonthly paymentsmortgagesnew carrefinancingMon, 07 Aug 2017 08:31:10 +0000Dan Rafter1994331 at http://www.wisebread.com8 Valuable Rights You Might Lose When You Refinance Student Loanshttp://www.wisebread.com/8-valuable-rights-you-might-lose-when-you-refinance-student-loans
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<p>Fannie Mae, the nation's largest buyer and guarantor of mortgage loans, made news recently when it announced it would sweeten the deal for folks who want to refinance their mortgage to pay off student loan debt. Fannie Mae works with 1,800 lenders nationwide, so their rule change affects many homeowners. At the same time, newer financial companies that target millennials have been pushing student loan refinances as a way to save money and simplify life.</p>
<p>Fannie Mae's change will make it more affordable for graduates &mdash; or parents &mdash; to use home equity to pay off student loans by waiving the usual extra charge for taking out cash when you refinance a home. With mortgage interest rates still at historic lows, this could indeed be an opportunity for young adults with high-rate student loans to reduce their monthly payments. But proceed with caution.</p>
<p>If you have a private student loan, you probably have nothing to lose by converting it into a mortgage, personal loan, or other consolidation loan. But if you have a federal loan, you should be more cautious about making changes. You may not realize you'd be losing these protections and options when you give up your federal student loan.</p>
<h2>1. Deferment</h2>
<p>If you lose your job or are unable to find a job after graduation, you may qualify for a <a href="http://www.wisebread.com/4-things-you-need-to-know-about-deferring-student-loans" target="_blank">deferment</a>, which halts your loan payments until you're in a better position to pay. With certain federal loans, the government will even pay the interest during deferment.</p>
<h2>2. Forbearance</h2>
<p>Similar to deferment, <a href="http://www.wisebread.com/what-is-student-loan-forbearance-anyway" target="_blank">forbearance</a> stops your payment obligation during a period of hardship. But unlike deferment, interest continues to accumulate.</p>
<h2>3. Income-driven repayment plans</h2>
<p>The government has rolled out a whole range of <a href="http://www.wisebread.com/which-student-loan-repayment-plan-saves-you-the-most" target="_blank">flexible payment options</a> in recent years to help federal loan borrowers handle payments. These plans cap your monthly payment at a certain percentage of income (10 percent for the program known as Pay As You Earn and 15 percent for the Income-Contingent Repayment Plan). Another benefit of income-driven repayment plans that you would lose if you refinance: an end date. With PAYE, any balance you still owe after 20 years is forgiven; with ICE, loans are forgiven after 25 years. (See also: <a href="http://www.wisebread.com/the-definitive-guide-to-pay-as-you-earn-a-great-student-loan-repayment-plan?ref=seealso" target="_blank">The Definitive Guide to Pay As You Earn</a>)</p>
<h2>4. A second chance if you default</h2>
<p>The Federal Loan Rehabilitation Program is a one-time opportunity to get a default removed from your credit report by making a series of on-time payments. This can save you from wrecking your credit and being unable to buy a home later.</p>
<h2>5. A central source for tracking loans</h2>
<p>If all your student loans are federal, you'll be able to check up on all of them online through the National Student Loan Data System. If you refinance some but not all of your loans, you may end up having to keep track of them using multiple resources.</p>
<h2>6. An unsecured loan</h2>
<p>If you default on your student loan, you can lose your good credit, but not much else. If you default on your mortgage, you can lose your house. Let that reality sink in before you jump to refinance a home loan to pay off student loan debt.</p>
<h2>7. A fixed interest rate</h2>
<p>Of course, you could use a fixed-interest mortgage or a fixed-rate personal loan to pay off your federal student loan. But make sure that's what you're getting. If you use a variable rate loan to consolidate your debt, you could get hit with a big payment increase when rates inevitably go up. Federal loans, on the other hand, are guaranteed to be fixed rate.</p>
<h2>8. Prepayment penalties</h2>
<p>Federal loans don't charge a fee if you pay more than you owe on any given month, but some private lenders do &mdash; check on that before you commit to a refinance.</p>
<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/8-valuable-rights-you-might-lose-when-you-refinance-student-loans">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2">
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</div> </div><br/></br>Personal FinanceEducation & TrainingReal Estate and Housingdebtdefaultdefermentfannie maefederal loansforbearanceinterest ratesmortgagesrefinancingrepayment plansstudent loansThu, 15 Jun 2017 08:30:16 +0000Carrie Kirby1963763 at http://www.wisebread.comShould You Ever Consider a Balloon Mortgage?http://www.wisebread.com/should-you-ever-consider-a-balloon-mortgage
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<p>Balloon mortgages have some tempting qualities. They come with lower interest rates and, because of this, smaller monthly payments. This can help borrowers get into a pricier home that they might not have been able to afford otherwise.</p>
<p>But balloon mortgages come with one huge risk: At the end of a set period, borrowers must pay off the remaining balance on these loans in full (the &quot;balloon&quot;). And these balances can be quite large.</p>
<p>So, how exactly do these mortgages work, and who do they work best for? Let's break it down.</p>
<h2>How balloon mortgages work</h2>
<p>A balloon mortgage comes with two parts. First, there's the standard repayment portion of the mortgage. For a set period of time, usually five to seven years, homeowners make monthly payments just like they would with a standard 30-year or 15-year fixed-rate mortgage.</p>
<p>During this period, homeowners' interest rates remain the same. This is a positive because the interest rates on a balloon mortgage tend to be lower than on standard fixed-rate loans or adjustable-rate mortgages.</p>
<p>After this period ends, though, the second part kicks in: You'll have to pay the balance of what you owe (the balloon payment). So if, for example, you still owe $130,000 on your mortgage at the end of your five- or seven-year period, you'll have to pay that entire $130,000.</p>
<p>Obviously, that's a lot of money. But most people who take out a balloon loan never make that payment out of their own pocket. Instead, they typically plan to refinance or sell their home before the balloon payment comes due.</p>
<p>If they sell the home, they can use the proceeds to pay off the loan in full. The same thing happens in a refinance: Once the refinance closes, borrowers pay off the remainder of the balloon and settle into making monthly payments on their new loan.</p>
<p>Sadly, unforeseen problems can ruin this plan.</p>
<h2>Problems</h2>
<p>What if, during the five or seven years after taking out a balloon loan, your FICO credit score falls? Now, lenders might not approve you for a refinance. The same could happen if your monthly income drops after taking out a balloon mortgage. Lenders might worry that you no longer make enough money to afford your monthly payments, and they won't approve you for a mortgage loan.</p>
<p>Then there's the question of home value. If the value of your home drops after you take out a balloon mortgage, you'll again struggle to refinance. Most lenders require that you have at least 20 percent equity in your home before they'll approve your request to refinance. If your home's value has fallen, odds are you won't have the equity you need.</p>
<p>Even if you are approved for a refinance, consider that interest rates can rise between the start and end of your balloon loan. If they rise significantly, you could be stuck with a much higher monthly mortgage payment.</p>
<p>If you can't refinance, you'll face some dismal options, assuming you can't afford the balloon payment on your own. The main option would be selling your home. That may not be an issue if you were planning on selling anyway, but what if you weren't? And what if you can't find a buyer? If your home has fallen in value since you took out your balloon loan, you might be forced to sell your residence for less than what you owe on your mortgage. If that happens, you still won't have enough money to pay off the balloon.</p>
<p>If you can&rsquo;t make that balloon payment, either from your savings, refinancing, or selling, your lender can begin foreclosure proceedings. You could end up losing your home and watching your FICO credit score fall by 150 points or more.</p>
<h2>What should you do if you can't pay the balloon?</h2>
<p>If you can&rsquo;t afford that balloon payment and you can&rsquo;t refinance or sell, your best bet is to call your mortgage lender immediately. They might be willing to work with you. Maybe your lender will shift your balloon loan to an adjustable-rate or fixed-rate loan, or even extend the term of your balloon loan, giving you more years to either sell, qualify for a refinance, or save up enough to make the payment.</p>
<h2>Is it ever a good idea to take out a balloon mortgage?</h2>
<p>Given the risks, the short answer is: Maybe.</p>
<p>If you absolutely know that you will sell your home before that balloon payment comes due, this kind of mortgage can work. You&rsquo;ll get the benefit of homeownership at a lower interest rate and lower monthly mortgage payment. The lower payments might even give you the opportunity to live in a home that you otherwise wouldn&rsquo;t have been able to afford. Then, you can sell, pay off the balloon, and move on.</p>
<p>It's difficult to call a balloon mortgage worthwhile otherwise. There are positives to this type of home loan, but they can easily be outweighed by the risks.</p>
<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/should-you-ever-consider-a-balloon-mortgage">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1">
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</div> </div><br/></br>Real Estate and Housingballoon mortgagebuying a homehomeownershiploanspaymentsrefinancingTue, 16 May 2017 08:30:14 +0000Dan Rafter1943631 at http://www.wisebread.com6 Money Moves to Make If Your Net Worth Is Negativehttp://www.wisebread.com/6-money-moves-to-make-if-your-net-worth-is-negative
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<p>One of the most illustrative financial figures to know is your total net worth. This is the value of all of your cash and assets, minus your debts. For many people, that figure is below zero.</p>
<p>Building a high net worth should be the ultimate goal of anyone seeking financial freedom. If your net worth is less than zero, consider making these moves ASAP. (See also: <a href="http://www.wisebread.com/10-ways-to-increase-your-net-worth-this-year?ref=seealso" target="_blank">10 Ways to Increase Your Net Worth This Year</a>)</p>
<h2>1. Reduce your spending</h2>
<p>One of the most direct ways to end up with a negative net worth is to spend more than you earn. Cutting unnecessary expenditures is the first step in having a net positive income each month. This can mean some tough choices, like eliminating cable, eating out, and your annual vacation. It may also require more extreme measures, like getting by without a car.</p>
<p>You can help yourself by tracking your spending meticulously in a budget so you know where money is going each month. Even if you think you are already living frugally, there's a chance you can find savings just by taking a closer look.</p>
<h2>2. Pay off your high-interest debt</h2>
<p>If your net worth is negative, it may be partially due to <a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt?ref=internal" target="_blank">high interest credit card debt</a> and other loans. Interest can quickly pile up and eventually overwhelm your earnings, putting you in negative net worth territory. Tackling debt starting with the highest interest rate first is called the avalanche method, and this can save you a lot of money on interest payments in the long run. Sometimes, even paying off just one credit card can make a huge difference in your financial situation. (See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=seealso" target="_blank">The Fastest Way to Pay Off $10,000 in Credit Card Debt</a>)</p>
<h2>3. Bring in more income</h2>
<p>If you're crumbling under a mountain of debt and you don't have enough income to pay off the debt, you must find a way to bring in more money. Start by searching for higher paying jobs or <a href="http://www.wisebread.com/5-times-you-should-demand-a-raise?ref=internal" target="_blank">asking for a raise</a> from your current employer. Consider starting a side hustle, small business, or taking an additional part-time job. It may also be worth exploring income-producing investments, such as dividend stocks or peer-to-peer lending. If you have a maniacal focus on earning more money, you will help yourself move from negative to positive in the net worth department.</p>
<h2>4. Invest</h2>
<p>Arguably the most important way to build net worth is through investing. If you are able to put even a small amount of your earnings into stocks or index funds that grow, you'll give your financial picture a boost over time. Obviously, investing in the stock market carries risks. But U.S. stocks have consistently risen in value over time, with long-term growth eventually surpassing losses during market crashes. The more you can invest, the better off you'll be, especially if you stay in the market for many years. You won't get rich overnight, but your overall net worth will eventually rise.</p>
<h2>5. Set a financial goal</h2>
<p>If you had enough money, what would you ultimately want to do with it? Would you want to buy a home? Start a family? Build a hefty retirement account? To increase your net worth, it helps to have a goal to motivate you to save. Ideally, your financial goal should be geared toward building a high net worth, not a one-time purchase like a car. Whether it's a down payment for a home, a comfortable retirement, or saving for college, your dreams can help keep you accountable.</p>
<h2>6. Refinance your mortgage</h2>
<p>Homeownership can be a great way to build net worth, but it can also be a drain on your finances if you have the wrong kind of mortgage. If your loan term is very long, or if you have a high-interest or interest-only loan, you may not be paying much toward the principal of the loan (or building any equity) for a while. And that could be a serious problem if you're having trouble making payments.</p>
<p>If you find yourself in this situation, you may want to consider refinancing to a shorter term or lower interest rate. There's no sin in borrowing to buy a home, but ideally, homeowners should seek a fixed-rate mortgage with a relatively short loan term: 30 years is standard, but a 15-year mortgage offers you the ability to build equity &mdash; and thus your net worth &mdash; at a faster pace. Just be sure you can comfortably make the monthly payments.</p>
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<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/6-money-moves-to-make-if-your-net-worth-is-negative">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2">
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</div> </div><br/></br>Debt Managementassetsgoalsinvestingmortgagesnet worthrefinancingsavingspendingstocksWed, 10 May 2017 08:00:08 +0000Tim Lemke1941242 at http://www.wisebread.com4 Smart Ways to Lower Your Monthly Mortgage Paymenthttp://www.wisebread.com/4-smart-ways-to-lower-your-monthly-mortgage-payment
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<p>If you struggle each month to make your mortgage payment, you're not alone. Financial challenges &mdash; such as a job loss, drop in household income, or major medical bills &mdash; could make paying a mortgage that was once affordable a financial burden. The Federal Reserve Board reported that in the fourth quarter of 2016, 4.15 percent of residential mortgages in the United States were delinquent. (See also: <a href="http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage?ref=seealso" target="_blank">8 Signs You're Paying Too Much for Your Mortgage</a>)</p>
<p>There is hope, though, if you are struggling to make your monthly mortgage payment. There are several steps you can take to lower the size of that payment.</p>
<h2>Lengthen your loan's term</h2>
<p>The more years attached to your mortgage, the lower your monthly payment will be. With a longer term, your loan payments are stretched out over more years, making each monthly payment smaller.</p>
<p>Consider this example: If you take out a $200,000 15-year, fixed-rate loan with an interest rate of 3.4 percent, your monthly payment, not including your taxes and homeowners insurance, will be about $1,400 a month. Say you take out that same $200,000 mortgage loan but in the form of a 30-year, fixed-rate loan with an interest rate of 4.2 percent. Your monthly payment, again not including taxes and insurance, will be just $978.</p>
<p>If you are struggling to make the monthly payments on a shorter-term loan, contact your lender and ask to have your loan reamortized to one with a longer term. You won't need to go through an official refinance to do this. But lenders will charge you a fee, one that <a href="https://ck.lendingtree.com/?a=391&amp;c=1682&amp;p=r&amp;s1=">LendingTree</a> says averages about $250.</p>
<p>Just remember, when you change your mortgage to one with a longer term, you'll pay significantly more in interest. This extra interest &mdash; which could hit $100,000 or more if you take the full term to pay off your mortgage &mdash; might be an acceptable cost if it helps you avoid falling behind on your mortgage payments and possibly foreclosing.</p>
<h2>Refinance to a lower interest rate</h2>
<p>The most common way to lower your monthly payment is to refinance your existing loan into one with a lower interest rate.</p>
<p>Say you originally took out a 30-year, fixed-rate mortgage of $180,000 at an interest rate of 5 percent. Your monthly payment, not counting taxes or insurance, would be about $966. Now say you owe $160,000 on that loan and you refinance that amount into a 30-year, fixed-rate mortgage loan with an interest rate of 4.2 percent. That payment would now fall to about $782 a month, a savings of about $184 a month.</p>
<p>There is one big negative that comes with refinancing: You'll have to pay fees to do it. You can expect to pay about 1.5 percent of the amount you are refinancing in closing costs. For a loan of $180,000, that comes out to $2,700 in closing costs.</p>
<h2>Get rid of PMI</h2>
<p>No homeowner enjoys paying for <a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway?ref=internal" target="_blank">private mortgage insurance</a>. This insurance, better known as PMI, protects the lender if you fail to pay your mortgage. Generally, it costs from 0.5 percent to 1 percent of your loan amount each year. So on a mortgage of $200,000, PMI can cost as much $2,000 a year, or about $166 a month.</p>
<p>You only have to pay PMI if you came up with a down payment of less than 20 percent of your home's purchase price when buying it. If you are paying PMI, you might be able to get rid of this expense, which would lower your monthly mortgage payment. You can request that your lender remove PMI once you have built at least 20 percent equity in your home. If you request this, your lender will send an appraiser to your home to determine its current market value. It will then calculate your equity to determine if you've hit that important 20 percent mark.</p>
<h2>Reassess your property taxes</h2>
<p>If you are like the majority of homeowners, a portion of every payment you send to your lender includes money used to pay off your property taxes. This is known as an escrow arrangement.</p>
<p>Under such an arrangement, your lender estimates how much money you'll need each year to pay your property taxes. If your lender estimates that your taxes will be $6,000 this year, it will add $500 to your monthly mortgage payment. It will then deposit that $500 into an escrow account. When your taxes are due, it will dip into this account to pay them on your behalf.</p>
<p>You might be able to reduce your monthly mortgage payment by requesting a reassessment with your county tax assessor's office or tax collector's office. If your taxes are reassessed and they drop, your monthly mortgage payment will fall, too.</p>
<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/4-smart-ways-to-lower-your-monthly-mortgage-payment">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3">
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</div> </div><br/></br>Real Estate and Housingescrowloan termsmonthly paymentsmortgagesoverpayingpaying too muchpmiproperty taxesrefinancingThu, 20 Apr 2017 08:00:07 +0000Dan Rafter1928277 at http://www.wisebread.comWhat to Do If You Have a Tax Lien On Your Househttp://www.wisebread.com/what-to-do-if-you-have-a-tax-lien-on-your-house
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<p>The government doesn't play around with taxpayers who skip out on what they owe. When you ignore your federal, state, or property tax bills &mdash; and you don't make any attempts to pay the balance &mdash; the government can place a tax lien on your house.</p>
<p>A tax lien is a legal claim on property for failure to pay taxes owed. It gives the tax authority (also known as the lienholder) first rights to your property over other creditors.</p>
<p>A lien differs from a levy in that the government doesn't seize your house or other property. Keep in mind that a lien can become a levy at some point if you never pay your taxes or never make arrangements to satisfy the debt. The tax authority decides when to impose a levy. You'll receive written notice of the levy at least 30 days before it takes place.</p>
<p>A lien is a serious matter because it can negatively affect your credit. Unpaid tax liens can remain on credit reports indefinitely, whereas paid tax liens can remain for up to seven years from the date filed.</p>
<p>Of course, the best way to handle a tax lien is to avoid one in the first place. But if the damage is done, here's how to put this ugly mark behind you.</p>
<h2>1. Dispute a filing error</h2>
<p>It's not uncommon for mistakes to appear on credit reports. In fact, according to recent data from the Consumer Finance Protection Bureau, 76 percent of the 185,700 credit-reporting complaints they've received since 2011 are related to errors &mdash; including state or federal tax liens that mistakenly appeared on credit reports.</p>
<p>If you check your credit report and find a lien reported in error, don't ignore this mistake. This can lower your credit score. Contact the IRS or your state tax office to file a dispute. If a review of your account proves that you don't owe the debt, the government withdraws the tax lien (as if it never happened). A withdrawal also removes the lien from your credit report.</p>
<p>Thankfully, the number of tax liens reported in error should be dropping. In response to criticisms by the CFPB, the top consumer reporting agencies &mdash; Experian, Equifax, and TransUnion &mdash; issued a new provision. As of July 1, 2017, tax lien and civil judgment data will <a href="http://www.nasdaq.com/article/clearing-misconceptions-about-new-consumer-data-laws-cm772651" target="_blank">only be included on credit reports</a> if they contain three pieces of information: the person's name, address, and Social Security number or date of birth. This information must be current according to court records as of the last 90 days.</p>
<p>The association representing the credit bureaus expects half of the consumers with tax liens on their credit reports will see them removed.</p>
<h2>2. Pay your tax bill in full</h2>
<p>Parting with your hard-earned money isn't easy, but paying your tax bill in full is one of the fastest ways to get the government off your back and move on with your life.</p>
<p>Typically, the government releases tax liens within 30 days of full payment of an outstanding debt (including penalties and interest). A release removes the lien from the property.</p>
<p>Unfortunately, paid tax liens can still remain on your credit report for up to seven years. However, under the IRS's Fresh Start Program, after paying your balance in full, you can submit a request to have a federal tax lien withdrawn from your credit report before the seven-year mark. Some states also give taxpayers the option of requesting an early withdrawal of a state tax lien from their credit report once they've paid their debt in full.</p>
<h2>3. Set up an installment plan</h2>
<p>If you can't pay what you owe in full, set up an installment plan with the government. This lets you pay off your tax debt over time. The tax authority releases the lien once you've set up a payment plan.</p>
<p>In the case of federal debt, the IRS allows individual taxpayers to set up monthly direct debit payments on debt amounts up to $50,000 for up to six years. Go to IRS.gov and apply for installment payments through the online payment system. If you owe more than $50,000, or require longer repayment terms, request installment payments by completing and mailing Collection Information Statement Form 433-A or Form 433-F.</p>
<p>Taxpayers who owe less than $25,000 and who've made at least three consecutive direct debit installment payments also can request to have the lien withdrawn from their credit report. However, defaulting on an installment agreement can trigger a new tax lien.</p>
<p>Some states also allow installment plans to repay a tax debt, though the criteria for these plans varies by state.</p>
<h2>4. Sell the property</h2>
<p>If you don't have money to pay an outstanding tax debt in full, and you can't afford an installment plan, another option is selling the property and satisfying the debt with proceeds from the sale. However, this method only works if the sale price is high enough to pay off the lien and any existing mortgages on the property. If the sale won't generate enough proceeds to pay off attached liens, you can't sell the property. If you're able to sell the home, the company handling your escrow account forwards payment to the lienholder after closing.</p>
<p>Keep in mind that you'll need to contact the lienholder before closing to request a lien release. In the case of federal taxes, this involves requesting a Certificate of Discharge from the IRS. If the request is approved, this document releases (or removes) the lien from the asset being sold (though it stays in place in every other way), and allows the property to transfer to the new owner lien-free.</p>
<h2>5. Refinance the property</h2>
<p>Then again, maybe you don't want to sell your home. There's also the option of refinancing and borrowing cash from your home equity to satisfy a state or federal tax lien on the property. Since refinancing replaces an existing mortgage with a new loan, mortgage lenders will not approve your loan application unless they have first lien position on the title. This puts the lender in priority position to benefit from liquidation if the property goes into default. For this to happen, you'll have to request a lien subordination from the IRS or your state tax office before applying for the loan.</p>
<p>Subordination doesn't eliminate a tax lien &mdash; rather, the lien becomes secondary to a lender's lien on the property. And with the lender's security interest first, you're more likely to acquire a new mortgage.</p>
<p>Be aware that your ability to refinance depends on how the tax lien impacted your credit. A tax lien will reduce your credit score, and to refinance, you'll have to meet a lender's income and credit score requirements. You need a minimum credit score of 620 for a conventional loan and a minimum credit score between 500 and 580 for an FHA loan.</p>
<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/what-to-do-if-you-have-a-tax-lien-on-your-house">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3">
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</div> </div><br/></br>Real Estate and HousingTaxescredit reportcredit scorefederalfiling errorsgovernmentIRSpayment planspropertyrefinancingstatetax billstax lienstaxpayersMon, 17 Apr 2017 08:30:08 +0000Mikey Rox1928274 at http://www.wisebread.comWhy Your Credit Score Matters in Retirementhttp://www.wisebread.com/why-your-credit-score-matters-in-retirement
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<p>You've left the working world and are ready to enjoy your retirement years. So, you might be forgiven for thinking that your days of fretting over your FICO credit score are over.</p>
<p>Guess what? They're not. Your three-digit credit score matters even in your retirement.</p>
<p>Lenders of all kinds, not to mention credit card providers, rely on your FICO credit score to determine how well you've managed your credit in the past. Having a low score can hurt you financially, even after you've left the days of commuting to work behind you.</p>
<h2>Why Scores Matter</h2>
<p>Your FICO credit score &mdash; you have three, one each maintained by the credit bureaus of Experian, Equifax, and TransUnion &mdash; is a key number throughout your adult life. Lenders rely on these scores to determine if you can qualify for loans. And if your score is low, even if you do qualify, you'll pay higher interest rates.</p>
<p>Generally, lenders consider a FICO credit score of 740 or higher to be an excellent one. Scores under 640 are generally considered weak by lenders, and will leave you with higher interest rates on the money you borrow.</p>
<p>As you make your way through adulthood, lenders will check your scores as you apply for auto loans, mortgages, or credit cards.</p>
<p>When you retire, the odds are high that you will no longer be applying for mortgage loans. However, this doesn't mean that credit scores will no longer play a key role in your financial life.</p>
<h2>The Best Credit Cards</h2>
<p>If you want to <a href="http://www.wisebread.com/5-best-credit-cards-for-people-with-excellent-credit?ref=internal" target="_blank">qualify for the best credit cards</a>, including ones with the <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">most generous rewards programs</a>, you'll need a high FICO score. Financial institutions only pass out their best credit cards to those customers who've proven that they have a history of paying their bills on time.</p>
<p>Having a high credit score is how you'll prove to banks that you are financially responsible. And if you want to qualify for the best credit scores during your retirement, you'll take steps to make sure that your credit score is strong in your 60s, 70s, 80s, and beyond.</p>
<h2>A New Car</h2>
<p>Maybe you plan to buy that dream car after retirement. If you can't pay for it in cash, you'll need an auto loan. And if you want to qualify for an auto loan with the lowest possible interest rate, you'll need a strong FICO credit score.</p>
<p>Auto lenders will check your credit score when you apply for financing. So make sure that your score doesn't take a dip after retirement.</p>
<h2>Auto Insurance Rates</h2>
<p>If you buy a new car, you'll need auto insurance, too. Guess what? Auto insurers rely on a variation of your credit score to help set their rates. Again, you'll want the highest possible credit score if you expect to qualify for the most affordable auto insurance.</p>
<p>Auto insurers use something called a credit-based insurance score to set rates. If this score is strong &mdash; and your driving history is good &mdash; you'll usually qualify for lower insurance rates. Your credit-based insurance score doesn't factor in your job or income. But it will rise if you pay bills such as your credit card payments and mortgage on time every month. It will fall if you miss payments, make payments 30 days or more late, have too much debt, or have accounts that have been sent to collections.</p>
<h2>Refinancing to a Lower Monthly Payment</h2>
<p>The goal is to enter retirement without having a monthly mortgage payment. That doesn't always happen, though. And if you are still paying off a mortgage loan when you enter your after-work years, you might want to someday refinance that home loan to one with a lower interest rate. Lowering your rate will give you a lower monthly payment. That extra cash each month could be important once you're living on a fixed income.</p>
<p>To qualify for a refinance, and for the lowest possible interest rate to make such a move financially worthwhile, you'll again need a high credit score. If your FICO credit score is 740 or higher, the odds are good that you'll qualify for an interest rate low enough to make refinancing a smart financial decision.</p>
<p>The lesson here is obvious: You can't put worrying about credit scores behind you just because you've entered retirement. The best move is to continue taking the steps that help guarantee a strong credit score &mdash; paying your bills on time and keeping your credit card debt low &mdash; even after you've left the working world.</p>
<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/why-your-credit-score-matters-in-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4">
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</div> </div><br/></br>Retirementcar insurancecredit historycredit scoreficoinsurance ratesmortgagesnew carrefinancingMon, 30 Jan 2017 10:00:08 +0000Dan Rafter1870059 at http://www.wisebread.comMy 2016 Budget Challenge: Can a Paint Job Help an Old House Pass a Re-Fi Appraisal?http://www.wisebread.com/my-2016-budget-challenge-can-a-paint-job-help-an-old-house-pass-a-re-fi-appraisal
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<p>[<em>Editor's Note: This is the latest episode in Max Wong's journey to find an extra $31,000 in a single year. Read the whole series </em><a href="http://www.wisebread.com/topic/max-wongs-budget-0" target="_blank"><em>here</em></a><em>.</em>]</p>
<p>We paid off our home equity line of credit two years early! It was a Festivus miracle.</p>
<p>Kind of.</p>
<p>Earlier this year, we failed to refinance the mortgage of Dinky Manor not once, but twice. We could not get our ramshackle, 1,000 square foot house to appraise for the whopping $640,000 we needed to get Mr. Spendypants out of his horrifically structured, pre-2007 housing crash home loan.</p>
<p>For all of you wondering about that $640,000 for 1,000 square feet&hellip;I guess you don't live in Los Angeles.</p>
<p>On Thanksgiving Eve, our friends Mary Ellen and Bob invited us out to dinner with Betsy and Murray (Mary Ellen's sister and brother-in-law). As Mary Ellen and Bob are both Wise Bread readers, they immediately started quizzing us about the 2016 Budget Challenge. They wanted to know all the sordid details &mdash; like how Mr. Spendypants puts up with my ever-increasing level of crazy. We were in the middle of whining about <a href="http://www.wisebread.com/my-2016-budget-challenge-reduce-debt-or-save-for-an-emergency" target="_blank">our underemployment</a> and our ever more <a href="http://www.wisebread.com/my-2016-budget-challenge-how-to-decide-when-to-sell-your-house" target="_blank">complicated real estate situation</a> when Murray reached across the table and handed me his business card.</p>
<p>Murray is a mortgage banker.</p>
<p>We followed up with Murray at his office the following week. He had already looked at a ton of real estate data for our area and couldn't understand why the house hadn't appraised for over $600,000. He started crunching the numbers. He thinks he can figure out how to refinance Dinky Manor's mortgage.</p>
<p>However, Murray had two immediate demands. First, Dinky Manor needs an exterior paint job, stat. The fact that our house is the dumpiest on the block isn't helping our cause. Alas, we don't have the $17,000 it would cost to hire professionals to paint the house, so Mr. Spendypants and I will spend a relaxing winter holiday scraping and sanding 80 years of bad paint jobs off the outside of our home. Luckily, one of my best friends is a retired painting contractor. He has agreed to come out of retirement to help us rehab the house for the appraisal before the mortgage rates jump any higher.</p>
<p>Could we pay down the home equity line of credit? This was Murray's second ask. Although our debt-to-loan ratio is better than average, if we zap our HELOC down to zero, it would make us look much less risky as borrowers.</p>
<p>Conceptually, paying off the debt is a no-brainer. What the bank wants dovetails nicely with my goal of paying off the loan (that is due in 2018) by the end of this year. It's the actual execution of this goal that sucks. After a <a href="http://www.wisebread.com/my-2016-budget-challenge-everything-breaks" target="_blank">solid start in January</a>, finding extra cash this year has been more difficult than we anticipated. Could we juggle the finances to pay off our loan at this later date without completely cannibalizing our emergency fund? Short answer: sort of. We took a $6,000 chomp out of our emergency fund. Since there is a small but real chance of us both being underemployed come March, and a somewhat larger chance that this mortgage refinance will fall through, this move makes us financially vulnerable.</p>
<p>Worst case scenario: We have to take out a new line of credit in March as a precaution. While this would not be the end of the world, that situation would not be ideal. I would like to avoid being that loser personal finance writer who can't kick her debt habit.</p>
<p>Best case scenario: The re-Fi goes through and we both find decent employment in March. If this happens we will be able to put the money we were using to pay down the HELOC each month toward replenishing our emergency fund and paying down the new, less expensive mortgage at a faster pace.</p>
<p>Fingers crossed.</p>
<h2>Progress So Far</h2>
<p>Although we did pay off a $15,000 loan with money we had socked away, I am not adding the $6,000 we pulled out of our emergency fund to the plus column of my 2016 budget challenge because we are going to have to pay our emergency fund back, as fast as humanly possible.</p>
<p>Panic is a really good motivator. If only we'd had that kind of &quot;inspiration&quot; all year long. We earned a combined $3,258.98 in the first two weeks of December. Here's how we did it.</p>
<p>Mr. Spendypants and I DJ'ed a corporate Christmas party. Although we did not win one of the flat screen televisions that were raffled off as door prizes, we did make $1,500 for five hours of work. Also, we ate at least $800 in foie gras cotton candy, spearified olives, and wagyu beef, so that was a great job perk.</p>
<p>To take advantage of the holiday shopping fever, I had planned to spend the first two weeks of December selling every single thing that is not nailed down in the house on eBay and Etsy. Alas, this did not happen, so my house is still filled with crap we don't need. Mr. Spendypants and I deemed it more prudent that I use every available second of daylight doing yard work and prepping to paint the house in advance of the looming mortgage appraisal appointment. We will save a lot more money if we can refinance the mortgage than I could ever make selling our stuff online.</p>
<p>Even with my new, yucky manual labor schedule, I managed to earn $1,758.98 on the side. In a previous incarnation, I was a jewelry designer. Mary Ellen and Betsy were nice enough to buy $243 in old stock from me for holiday gifts. I made $41 selling books to a second hand bookshop. I have been <a href="http://www.wisebread.com/5-easy-to-make-deluxe-gifts-for-under-15" target="_blank">propagating succulent cuttings</a> from my garden all year long. I made $124 selling little potted plants off my front porch to passers-by. I made $10.73 selling an old dress (that I had gotten for free) to a consignment store. One of my neighbors paid me $25 to run an errand for her, and another neighbor paid me $100 for pet sitting. I made $100 from writing jobs. I sold $707 in jam, honey, and handmade lip balm. Although I barely have any merchandise for sale on Etsy, I received a last minute order that netted me $363.25.</p>
<p>Phew.</p>
<p>Because I source holiday gifts year round, we actually managed to spend $0 on holiday gifts for friends and family this year. Just about everyone got <a href="http://www.wisebread.com/start-now-you-can-make-these-23-delicious-holiday-gifts" target="_blank">homemade goodies</a> that I had made in advance or gifts paid for through barter. This was a total win. Unfortunately, we did not get to wallow in our thrifty genius for long. We have spent $495 on painting supplies for the house so far&hellip;</p>
<p><strong>Goal:</strong> $31,000.00</p>
<p><strong>Amount Raised:</strong> $33,126.40</p>
<p><strong>Amount Spent:</strong> $14,093.66</p>
<p><strong>Amount Left to Go:</strong> $11,967.26</p>
<br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/max-wong">Max Wong</a> of <a href="http://www.wisebread.com/my-2016-budget-challenge-can-a-paint-job-help-an-old-house-pass-a-re-fi-appraisal">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1">
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<span class="field-content"><a href="http://www.wisebread.com/this-is-the-difference-between-a-loan-and-a-line-of-credit">This Is the Difference Between a Loan and a Line of Credit</a></span>
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</div> </div><br/></br>Real Estate and Housingappraisalbudget challengeHELOChome equity line of credithome loansmax wongs budgetmortgagesre-firefinancingFri, 13 Jan 2017 10:30:36 +0000Max Wong1870057 at http://www.wisebread.com